Cheering for the greater evil

The value of Mark Ameswritings to humanity lies in the fact that sometimes he goes after the right people. It is diminished by his habit of assaulting the lesser evil out of any two, in 2015 as in 1998, in California as in Moscow. Another of his habits is stating weak conjectures as proven facts. “A works for a non-profit partly financed by B, who might support political doctrine X. Therefore, A is a paid propagandist for the X-ers.”

Ames has made three principal accusations in his recent attack on Peter Pomerantsev and his book, none of the three aimed against its core message. One is that Pomerantsev is not specific enough about the people and events he describes, “a vague, foggy, masked quality to his writing and to his approach to most things… people without last names or recognizable faces…” Pomerantsev did not want to compromise his sources, most likely. Essentially, Ames doubts if Pomerantsev worked for TNT in the late 2000s at all, but these two links from 2009 leave little doubt in my mind that he did.

Second, Ames claims that Putin’s postmodern unreality machine is simply a continuation of Yeltsin’s and cites Victor Pelevin’s fiction as proof. I’m not convinced, simply put.

The third prong – typically Amesian – is the faulty inference that Pomerantsev must be a Neocon 2.0 propagandist because he works for Legatum Institute, founded by Christopher Chandler, once a major investor in Russian equities together with his brother Richard. The brothers Chandler were not as secretive about their Russian exposure as Ames claims – see this 2003 Gazprom press release – although they are not the best-known portfolio investors in Russian equities from the 1990s.

…the Chandlers make buckets of fast money by buying into totally depressed and corrupt emerging markets… driving up the price of their assets by making a lot of noise about corporate governance and corruption, and then selling out when those investments tick up during what look like to outsiders as principled battles over corporate governance issues.

That sounds like a sort of activist investing. Whether it benefits other investors and society at large is being debated in the US, but considering the state of corporate governance at most traded Russian companies in the 1990s, I can’t see much that was wrong with that approach there and then.

The Chandler brothers reportedly were the single biggest foreign beneficiaries of one of the greatest privatization scams in history: Russia’s voucher program in the early 1990s…

Reportedly? (Leaving aside the question of what’s a scam and what’s legitimate reform.) Let’s look at the 2006 Institutional Investor interview Ames also links to. The Chandlers’ denial of their activism sounds fake, I agree, but it’s the size of the gains that Ames is talking about. UES and Mosenergo, about $800 million over one or two years. Impressive, but Soros and Harvard probably made more than that.

What about the brothers’ largest Russian investment, $1 bln in Gazprom in 1998? It yielded a 12.5% total return over 4.5 years, close to pathetic, and a huge missed opportunity. In February 1998, when they bought 5%, Gazprom’s market cap was $20 bln; in May 2008, it almost hit $360 bln. The return would have worked out to more than 30% per year on a cumulative basis. Perhaps the Chandlers decided that once Miller had replaced Vyakhirev as CEO, further gains would be limited. Perhaps they were forced to divest – 5% is a politically sensitive share – especially if they violated the ring-fence rule by buying domestic shares, rather than DRs, in 1998, and found themselves in a vulnerable position in 2003.

Even assuming that the Chandlers are only seeking a second chance with Gazprom (especially as the DRs are worth about as much now as in 1997), an abundance of activist investors is not Russia’s greatest problem.

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